Find out today what the legal world will be talking about tomorrow.
Blockchain is all the rage, with one of its great advantages being considered to be particularly safe. The concept of blockchain has been popularized by cryptocurrencies such as Bitcoin. In the meantime, however, it is no longer used for cryptocurrencies only, but in a variety of industries. Development is still in its infancy, and there continue to be technical and legal hurdles. Nevertheless, numerous companies and working groups are closely looking at blockchain, including in the field of IP rights. The European Union Intellectual Property Office (EUIPO) is also actively investigating the potential of blockchain (cf. https://euipo.europa.eu/ohimportal/en/news/-/action/view/4121074). This article highlights some of the considerations that are currently being discussed in the field of intellectual property.
Why can blockchain be an advantage in IP?
Blockchains are databases storing certain events or transactions in chronological order. Unlike conventional databases, they are decentralized since they are stored on the computers of all blockchain participants.
In blockchain, information is routed directly from senders to receivers, without any use for third parties. Each transaction in the database is evaluated and verified by complex technical settings. Transactions are only added to the chain upon verification and then stored in the database. All participants receive copies of the relevant transaction. The stored transactions and events are therefore unchangeable, and no information is lost.
Since the blockchain network is decentralized, complex encryption is used and because transactions are transparently linked in chronological sequence, interventions by hackers and the falsification of data are considered almost impossible in blockchain. It is therefore considered to be particularly secure and trustworthy. Since there is no central verification unit, transactions can be completed very quickly, thus the technology is considered to be very efficient as well. In view of these features, it may be of interest in the following areas of IP law:
Administration and proof of rights
A database on blockchain basis with information on all aspects of an intellectual property right would be conceivable. The database might contain information on when a certain property right was applied for, registered, licensed, or commercially used. Interfaces to retailing, where the property right, such as the trademark or design, is used, may allow for the desired information on use to be reported directly to the database. In judicial or administrative proceedings, proof of use would be provided more easily and evidentiary problems avoided. Proof of first use, genuine use, and recognition of well-known trademarks would be facilitated.
Decentralized collection of information would make the management of individual IP rights even more reliable and effective in view of the security provided by blockchain. IP portfolios takeovers would be easier through secure and trustworthy technology.
Enforcement of IP rights
Blockchain-based smart contracts may be of interest in IP. Smart contracts are computer programs on blockchain basis, where contractual terms are stored in the form of if-then rules. These contractual terms are executed and monitored independently (for information on how this works, see www.skwschwarz.de/en/news/articles/detail-of-article/news/smart-contracts-intelligente-vertraege-der-zukunft/4/detail/News/)
Smart contracts can automate the protection and enforcement of IP rights. Smart contracts could, for example, be used to grant licenses or to create and enforce contracts in general. For this purpose, the smart contract would contain the rule that rights will be granted as soon as the consideration (e.g., payment) has been made. This would allow the transfer of rights to be linked to the payment in real time. Separate implementation activities such as the registration of incoming payments are no longer required. The first blockchain-based platforms already exist in the music industry and automatically manage artists’ copyrights to titles. The smart contract allows artists to receive royalties automatically and in real time once customers buy a song (cf. https://peertracks.com/).
Tracking legal infringements in the supply chain
Great potential for the use of blockchain technology is also seen in the prosecution of legal violations in the supply chain, such as product piracy and the prosecution of violations in distribution systems. Products could be tracked via registration with blockchain technology. Using the appropriate settings (such as codes or seals), product would report information to the blockchain about where they are located at any time and, where applicable, who is in possession of which product. This would allow participants in the blockchain to constantly track the products in the distribution chain. In addition, additional information, such as on production and quality, could be stored for the product. This allows the verification of products, because it can be confirmed, for example, that the branded product is not a counterfeit. Consumers would have greater certainty that they are not buying counterfeit products, stolen products might be found again. Customs authorities may also make use of this information. Another option of using blockchain lies in the easy uncovering of leaks in distribution systems through the traceability of the products.
Summary and conclusion
In summary, blockchain technology in IP may offer cost-effective possibilities for proving and enforcing IP rights or pursuing legal violations in the supply chain due to its security and transparency. Since blockchain technology is gaining importance not only in companies and associations, but also in government and trademark offices, it is desirable for the legislator to overcome legal hurdles in the application of blockchain technology, such as through legislative changes, so that the technology may be widely used in the future.
Blockchains are databases storing certain events or transactions in chronological order. Unlike conventional databases, they are decentralized since they are stored on the computers of all blockchain participants.
In blockchain, information is routed directly from senders to receivers, without any use for third parties. Each transaction in the database is evaluated and verified by complex technical settings. Transactions are only added to the chain upon verification and then stored in the database. All participants receive copies of the relevant transaction. The stored transactions and events are therefore unchangeable, and no information is lost.
Since the blockchain network is decentralized, complex encryption is used and because transactions are transparently linked in chronological sequence, interventions by hackers and the falsification of data are considered almost impossible in blockchain. It is therefore considered to be particularly secure and trustworthy. Since there is no central verification unit, transactions can be completed very quickly, thus the technology is considered to be very efficient as well. In view of these features, it may be of interest in the following areas of IP law:
Administration and proof of rights
A database on blockchain basis with information on all aspects of an intellectual property right would be conceivable. The database might contain information on when a certain property right was applied for, registered, licensed, or commercially used. Interfaces to retailing, where the property right, such as the trademark or design, is used, may allow for the desired information on use to be reported directly to the database. In judicial or administrative proceedings, proof of use would be provided more easily and evidentiary problems avoided. Proof of first use, genuine use, and recognition of well-known trademarks would be facilitated.
Decentralized collection of information would make the management of individual IP rights even more reliable and effective in view of the security provided by blockchain. IP portfolios takeovers would be easier through secure and trustworthy technology.
Enforcement of IP rights
Blockchain-based smart contracts may be of interest in IP. Smart contracts are computer programs on blockchain basis, where contractual terms are stored in the form of if-then rules. These contractual terms are executed and monitored independently (for information on how this works, see www.skwschwarz.de/en/news/articles/detail-of-article/news/smart-contracts-intelligente-vertraege-der-zukunft/4/detail/News/)
Smart contracts can automate the protection and enforcement of IP rights. Smart contracts could, for example, be used to grant licenses or to create and enforce contracts in general. For this purpose, the smart contract would contain the rule that rights will be granted as soon as the consideration (e.g., payment) has been made. This would allow the transfer of rights to be linked to the payment in real time. Separate implementation activities such as the registration of incoming payments are no longer required. The first blockchain-based platforms already exist in the music industry and automatically manage artists’ copyrights to titles. The smart contract allows artists to receive royalties automatically and in real time once customers buy a song (cf. https://peertracks.com/).
Tracking legal infringements in the supply chain
Great potential for the use of blockchain technology is also seen in the prosecution of legal violations in the supply chain, such as product piracy and the prosecution of violations in distribution systems. Products could be tracked via registration with blockchain technology. Using the appropriate settings (such as codes or seals), product would report information to the blockchain about where they are located at any time and, where applicable, who is in possession of which product. This would allow participants in the blockchain to constantly track the products in the distribution chain. In addition, additional information, such as on production and quality, could be stored for the product. This allows the verification of products, because it can be confirmed, for example, that the branded product is not a counterfeit. Consumers would have greater certainty that they are not buying counterfeit products, stolen products might be found again. Customs authorities may also make use of this information. Another option of using blockchain lies in the easy uncovering of leaks in distribution systems through the traceability of the products.
Summary and conclusion
In summary, blockchain technology in IP may offer cost-effective possibilities for proving and enforcing IP rights or pursuing legal violations in the supply chain due to its security and transparency. Since blockchain technology is gaining importance not only in companies and associations, but also in government and trademark offices, it is desirable for the legislator to overcome legal hurdles in the application of blockchain technology, such as through legislative changes, so that the technology may be widely used in the future.
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